The Commercial Court (Financial List) has given a significant judgment on the scope and effect of the exclusive jurisdiction clause in an ISDA Master Agreement, and the application of Article 25 of the Recast Brussels Regulation, in the circumstances of a dispute about the validity and effect of a subsequent contract between the parties without a jurisdiction clause.
Brescia entered into swap transactions with Deutsche Bank in 2006 to restructure its existing indebtedness. The ISDA Master Agreement and transactions were governed by English law and subject to the exclusive jurisdiction of the English Courts.
In 2015, Deutsche Bank brought proceedings in England seeking declarations that, amongst other things, Brescia had capacity and authority to enter into the swaps, which were valid and binding in accordance with their terms. Brescia did not object to the jurisdiction of the English Court to determine Deutsche Bank’s claims, but nonetheless commenced parallel proceedings in Italy seeking to recover damages in respect of the swaps.
The original English and Italian proceedings were compromised by the parties in 2017. The settlement agreement did not contain a jurisdiction clause. Instead it provided that the settlement agreement would be governed by Italian law but then clarified that “it remains understood that the Swaps and the ISDA Agreement related thereto are subject to English law and subject to the exclusive jurisdiction of the English Courts as established in the relevant contract.”
In 2020, following the landmark Italian Supreme Court decision in Banca Nazionale Del Lavoro S.P.A v Municipality of Cattolica, Brescia indicated that it was considering issuing new proceedings in Italy to seek to set aside the settlement agreement and renew its claims in respect of the swap transactions.
Deutsche Bank therefore issued new proceedings seeking similar relief to the original English proceedings, together with declaratory relief to uphold the terms of the settlement agreement. Brescia accepted that the English Court had jurisdiction to determine Deutsche Bank’s claims in relation to the swaps but objected to the English Court’s jurisdiction to decide the parties’ disputes about the validity and effect of the settlement agreement under Article 25 of the Recast Brussels Regulation. Brescia contended that Article 25 of the Recast Brussels Regulation did not apply because the settlement agreement did not have a jurisdiction clause and the jurisdiction clause in the ISDA Master Agreement did not extend to disputes about the settlement agreement.
Mr Justice Robin Knowles rejected Brescia’s jurisdiction challenge, applying the ‘extended Fiona Trust principle’ where a jurisdiction clause in one contract is held to be applicable to disputes arising in connection with another contract. The Judge held that the parties intended all disputes relating to the swaps to be determined in the same forum. That included disputes about the validity and effect of a settlement agreement that compromised their earlier disputes about the swaps. Under Article 25 of the Recast Brussels Regulation, the disputes about the validity and effect of the settlement agreement arose out of the “particular legal relationship” between the parties that was established by the ISDA Master Agreement, so the English Court had exclusive jurisdiction to decide such disputes.
The Judgment is a significant application of the extended Fiona Trust principle in the context of the standard jurisdiction clause in an ISDA Master Agreement. It is clear that such clauses are capable of applying to disputes about subsequent contracts entered into between the parties that relate to transactions concluded under the ISDA Master Agreement.
Sonia Tolaney QC and Andrew Lodder acted for Deutsche Bank, instructed by Allen & Overy LLP.